Foreign Direct Investment and Economic Growth in Zambia

Eyup Dogan

Abstract

This paper aims to examine the causality relationship between foreign direct investment inflow (FDI) and economic growth (GDPGR) in Zambia using the time-series analyses. All analyses are conducted with the annual data of foreign direct investment and real gross domestic product of Zambia over the years of 1970 and 2011. The results of the ADF unit root test show that the time-series data are non-stationary at levels, but become stationary in the first differences. Besides, the results of the Johansen co-integration test indicate that both series are co-integrated, and long-run equilibrium thus exists between FDI and GDPGR. Findings of Granger-causality test suggest that there is a one-way causality effect running from FDI to GDPGR.

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